Ch 01 Om and Productivity

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MGT 3200 – Operations

Management: Chapter 1:Operations & Productivity

Prof. Victor B. Marshall

5/30/10 1Prof. Victor B. Marshall



Chapter Learning Objectives

5/30/10 2©2010 Victor B. Marshall

Chapter# ChapterDesc Obj Objective

Chapter01Operationsand

Productivity1

De7ineOperationsManagement(OM).

ProvideanexampleofOM,includinginputs,

outputs,resources,andtransformation.


Productivity2 DiscusswhyOMisimportant


Productivity3

Recognizeanddescribethecriticaldecisions

ofOMthatwewillstudyinthisclass


Productivity5

Listanddescribedifferencesbetween

productsandservices


Productivity6

DescribetheimportanceofservicestotheUS

economy


Productivity ListandexplaincurrentOMtrends

Chapter01 OperationsandProductivity 8 De7ine,calculate,andinterpretproductivity


Productivity9

Calculateandinterpretsingle‐factorand

multi‐factorproductivity


Productivity11

Recognizeethicalchallengesfacingoperations

managers



These slides are designed to accompany these

textbooks:

5/30/10 3©2010 Victor B. Marshall



Operations Management





Key Definitions

•

Production – Is the creation of goods and services

• Operations management (OM)

– Is the set of activities

– That creates value

– In the form of goods and services

– By transforming inputs into outputs




SIPOC Transformation Process Model

• A Process Mindset – SIPOC

– Process (lat. processus - movement) is a naturally occurring or designed sequence of changes of properties / attributes of asystem / object.

– Business results are achieved through processes

– Improving results requires process improvement / design andcontrol

• Examples:

– Business Process Design / Redesign

– Statistical Process Control

Suppliers Inputs Processes Outputs Customers




Transformations

•

Physical--manufacturing• Locational--transportation

• Exchange--retailing

• Storage--warehousing

• Physiological--health care

• Informational--telecommunications




Organizing to Produce Goods & Services

• Essential functions:

– Marketing – generates demand

– Production/operations – creates the product

– Finance/accounting – tracks how well the organization is doing,pays bills, collects the money




Why Study Operations Management (OM)?




Why Study Operations Management (OM)?

• OM is one of three major functions - marketing,finance, and operations - of any organization

• We need to know how goods and services areproduced

•

We need to understand what operations managersdo

• OM is typically such a major part of an organizationby a number of measures - including costs




What Operations Managers Do

• Basic Management Functions

– Planning

– Organizing

– Staffing

– Leading

– Controlling




Key Operations Management Decision Areas

• Service & Product

Design

• Quality Management

• Process & Capacity

Design

• Location

• Layout Design

• Human Resources &Job Design

• Supply Chain

Management

• Inventory, MaterialRequirements Planning

(MRP) & Just-In-Time

(JIT)

• Intermediate and Short-Term Scheduling

• Maintenance



Goods & Services





Comparing Goods versus Services

• Can be resold • Reselling unusual

• Can be inventoried • Difficult to inventory

• Some aspects of quality

measurable • Quality difficult to measure

• Selling is distinct from production • Selling is part of service

• Product is transportable• Provider, not product, is often

transportable

• Site of facility important for cost • Site of facility important for customer contact

• Often easy to automate • Often difficult to automate

• Revenue generated primarily from

tangible product

• Revenue generated primarily from

the intangible service




Automobile

Computer

Installed carpeting

Fast-food meal

Restaurant meal/auto repair Hospital care

Advertising agency/ investment management

Consulting service/ teaching

Counseling

Goods & Services:

Typically a Combination/Mix versus a Pure Either/Or



The Services Economy





Development of the Service Economy




Development of the Service Economy

United States

Canada

France

Italy Britain

Japan

W. Germany

1970 2005

| | | | |

40 50 60 70 80

Percent



Trends in

Operations Management





New Challenges in Operations Management

From To

Local or national focus Global focus

Batch shipments Just-in-time

Low bid purchasing Supply chain partnering

Lengthy product developmentRapid product development,

alliances

Standardized products Mass customization

Job specialization Empowered employees & teams



Productivity





Productivity

• Productivity is the ratio of:

– Outputs (goods and services)

– Divided by

– Inputs (resources such as labor and capital)

• Productivity Ratios can be compared:

– Across various entities within the same industry or function todetermine relative performance (also know as benchmarking)

– Across time for a given entity to evaluate improvement

• Productivity Improvements are required to improve the standard of living

.)Capital,..Labor,assuch(ResourcesInputs

Services)&Goods(Output

tyProductivi=




Goods

and services

The U.S. economic system

transforms inputs to outputsat about an annual 2.5%

increase in productivity per

year. The productivity

increase is the result of a

mix of capital (38% of 2.5%),

labor (10% of 2.5%), and

management (52% of 2.5%).

Labor,

capital,management

The Economic System




Labor Productivity Calculations




Multi-Factor Productivity




Example Productivity Calculations:

Collins Title Company

Old System New System % ChangeOutput

Titles per Day 8 14 75%

Inputs

Hours per Day 32.00 32.00 0%

Labor Cost per Day 640.00$ 640.00$ 0%

Overhead Cost per Day 400.00$ 800.00$ 100%Total Cost per Day 1,072.00$ 1,472.00$ 37%

Labor Productivity

Titles per Hour 0.2500 0.4375 75%

Total Factor Productivity

Titles per Input Cost 0.0075 0.0095 27%

% Change =New

Old−1

•100




Service Productivity

•

Typically labor intensive• Frequently focused on unique individual

attributes or desires

• Often an intellectual task performed byprofessionals

• Often difficult to mechanize

• Often difficult to evaluate for quality




Productivity Improvements at Taco Bell

• Improvements

– Revised the menu

– Designed meals for easypreparation

– Shifted some preparationto suppliers

– Efficient layout andautomation

– Training and employeeempowerment

• Results

– Preparation time cut to 8seconds

– Management span of control increased from 5to 30

– In-store labor cut by 15hours/day

– Stores handle twice thevolume with half the labor

– Fast-food low-cost leader



Ethical Challenges





Ethics & Social Responsibility

• Challenges facing operations managers:

– Developing safe quality products

– Maintaining a clean environment

– Providing a safe workplace

–

Honoring community commitments

Ch 01 Om and Productivity

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